International

The dollar retreated further yesterday. In a bid to rebalance their portfolios, oversubscribed investors are pulling back on speculation that the Fed may not hike rates in the near term as anticipated as indicators gave signs of this only likely happening towards the end of 2022. The dollar index touched a two-week low at 92.274 yesterday, with US Treasury yields also on the backfoot as safe-haven demand decreased. The index closed out he session at 92.296.

The euro was on the rise yesterday, benefit from dollar weakness as investors ceased opportunities to buy the dip when the euro briefly touched a low $1.1794 in early session trade, and then sharply shot for a high $1.1878 just before session end. Despite a lagging vaccine rollout and lockdown restrictions, both are expected to bear fruit. As a result, technicals show the single currency potentially chasing the $1.2000 resistance level as risk appetite increases in the market. The euro closed out the session at a firm $1.1877

Despite a strong start to the day, benefitting from improving risk sentiment, the pound was softer towards session end as much of its recent supporting factors, including its impressive vaccine rollout, have already been priced in. The euro’s uptick stole the show yesterday, with the pound’s momentum strength now in question. The pound strengthened to $1.3917 in the morning, dropped down to $1.3802 in the evening, and closed out the session at $1.3825

ZAR

The Rand saw an extension of risk sentiment roll over to yesterday, allowing it to make an attempt at breaking the R14.50/$ level. While the weaker dollar enabled the Rand to do just that, it was only the Bid that saw itself briefly below R14.50/$ with the rand trading at a low of R14.4904/$ before closing the day at R14.5238/$.

While the Rand has shown resilience over the past few weeks, particularly during times where the dollar was strong, it bodes a bit of optimism for the local unit which may hopefully take more advantage when the dollar finds itself on the back foot. However, due to South Africa’s fiscal issues and the time it will take to fix these, Rand strength is simply not sustainable in the medium- to long-term.

Data card today is very much empty like yesterday’s, however we can look forward to business confidence and PMI data releases locally which while give some direction as to how we see our road to recovery after this pandemic is over. We expect sentiment to continue driving the ZAR today with an eye on these data releases and any headlines.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.

International

The dollar kicked off the week to a great start as risk sentiment shifted to the cautious side due to mounting concerns over hedge fund defaults, sending investors to havens. Upbeat US economic data as well as the COVID-19 vaccine rollout across the US being on track, or possibly even ahead of schedule, aided the greenback in its surge forward, allowing the dollar index to reach a high of 92.964 and ended the session at 92.944.

The euro pulled back and reversed the gains made last Friday due to declining risk sentiment and dollar strength, while concerns over the economic impact of a third wave of COVID-19 infections, and similarly lockdown restrictions, added fuel to the fire. The single currency traded at a low of $1.1761 just before ending the session at $1.1764.

The pound continues to show its resilience and maintains its position as the best performing G10 currency for the year as it surged forward in early trade. Most of the recent gains for pound sterling can be attributed to the faster vaccine rollout across the UK, with a total of 30 million adults already vaccinated. This despite the EU trying to cause a vaccine war with the UK, with Brussels threatening to stop the export of doses to Britain.  The pound rose to a high of $1.3847, before falling to a low of $1.3756 and ended the day only marginally in the red at $1.3763.

ZAR

The rand was range-bound for the better part of the day yesterday, teetering around R15.00/$ before picking a side and recovering against the dollar, despite increased dollar demand. The rand remains sensitive to US inflation speculative views that have caused the rand’s uncertain nature. Our local unit strengthened to R14.7835/$ and ended the session at R14.9117/$.

We look forward to German inflation and US consumer confidence data out today to influence EM currency direction today.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.